Trump readies new round of controversial Medicaid changes

“Every American deserves the dignity and respect of high expectations,” CMS Administrator Seema Verma, right, said in November, as she kicked off efforts to revamp the Medicaid program — a line that she’s repeatedly invoked in the nine months since. | Evan Vucci/AP Photo

The Trump administration is preparing to let conservative-led states impose additional restrictions on the nation’s health program for the poor that could push tens of thousands of people off coverage, POLITICO has learned.

The high-stakes changes, involving work requirements and questions about illegal drug use, have been the subject of intense behind-the-scenes lobbying in recent months by federal and state lawmakers in the latest chapter of the GOP’s long-running efforts to reshape Medicaid — a policy priority extending back to the Reagan era.

Story Continued Below

And they are moving forward even after a federal judge blocked Kentucky’s work requirement in June, saying the Trump administration failed to consider how the plan would affect coverage, and new evidence that thousands of Arkansans will lose benefits because of the state's work requirement. Advocacy groups have sued to stop Medicaid work requirements in both states and threaten further litigation if more changes are OK'd.

Nonetheless, the administration is expected to sign off soon on work requirements in three more states — Arizona, Wisconsin and Maine — while approving limited drug testing questions sought by Wisconsin’s GOP Gov. Scott Walker, according to four individuals with knowledge of the process.

Administration officials say that Medicaid beneficiaries should be encouraged to seek jobs to ensure they move off the program eventually.

“Every American deserves the dignity and respect of high expectations,” CMS Administrator Seema Verma said in November, as she kicked off efforts to revamp the Medicaid program — a line that she’s repeatedly invoked in the nine months since. “As public officials, we should deliver programs that instill hope and say to each beneficiary that we believe in your potential.”

POLITICO Pulse newsletter

Get the latest on the health care fight, every weekday morning — in your inbox.

Email

By signing up you agree to receive email newsletters or alerts from POLITICO. You can unsubscribe at any time.

An attempt by Arizona to protect Native Americans from work requirements is also expected to be denied as part of the review — a move that effectively reiterates the administration's position that members of tribes might need to get jobs to keep their health care.

HHS and Justice Department officials are additionally finalizing the Medicaid work requirements sought by Maine, amid broader legal uncertainty about the state’s health program under Republican Gov. Paul LePage, who has refused to implement a voter-approved Medicaid expansion.

“Everything’s being steered through the Justice Department right now,” said one official. “They’re trying to make it bulletproof.”

The goal is to make the latest Medicaid changes withstand simultaneous legal challenges, similar to those targeting early versions of President Donald Trump’s travel ban, according to officials familiar with the process.

Advocates say the result will be disastrous for poor and working-class Americans.

“The Trump administration seems intent on moving as quickly as possible to approve these harmful waivers which will clearly result in many more thousands of vulnerable people losing their Medicaid coverage,” said Joan Alker, who runs Georgetown University's Center for Children and Families.

Alker and other researchers say it is hard to grasp the scopeof the Trump administration's planned changes because states have begun hiding projections of coverage losses. Kentucky's projection that 95,000 people would lose coverage influenced the judge's decision to block its overhaul.

CMS declined to comment on details of the pending state waivers or the timeline for approval.

"To protect the integrity of [our] process, we do not comment on pending applications," a spokesperson said. "While we cannot forecast a decision on components of a state's application, we strive to review and process applications as quickly as possible."

States set conditions of Medicaid eligibility with federal approval, and the Trump administration is seen as a boon to conservative states which have long sought to pare Medicaid spending. HHS officials say work requirements aren't driven by a desire to cut costs.

"There's actually a clinical rationale for having community engagement," HHS Deputy Secretary Eric Hargan told POLITICO on Wednesday, arguing there's evidence that requiring people to work or participate in other activities makes them healthier. "I think it could be additive to health care."

Wisconsin wins compromise on drug testing

One of the most controversial changes sought by the states is Wisconsin's attempt to drug test its Medicaid applicants — an effort that advocates and lawyers say is illegal and that also drew objection from the Trump administration. Drug testing has never been allowed as a condition of Medicaid, in any state.

Instead, Wisconsin is expected to win approval to ask applicants to disclose on their Medicaid applications whether they've used drugs or are in recovery, but won't make coverage decisions based on the answers provided, according to three officials with knowledge of the plan.

"It's a political give to Walker," said an administration official briefed on the plan, noting the Wisconsin governor has sought drug testing across multiple social programs, including food stamps.

Advocates say a partial effort to collect drug use information is still a step too far.

"Even if it's technically benign, it might not be — the devil's in the details," said Georgetown's Alker. “If people hear there's a drug testing requirement, that might be a deterrent from even applying."

The state had sought to require all applicants to go through drug screening, and if indicated, follow-up drug testing. Those testing positive would be required to complete substance use treatment to be eligible for Medicaid.

"This waiver amendment supports Wisconsin's multifaceted approach to battle substance abuse, including heroin and prescription drug addiction," said Julie Lund, the communications director of Wisconsin's health department. She added the change would help Wisconsin residents "move from government dependence to true independence by encouraging healthy behaviors through wellness and prevention."

States set to lose attempt to protect tribes

CMS also is poised to reject Arizona's latest attempt to carve out Medicaid protections for Native Americans — a move that challenges precedent on tribal sovereignty.

Arizona is among several states attempting to walk a policy tightrope: impose work requirements on some Medicaid enrollees, but also exempt Native Americans, given their historic standing as separate governments — and the tribes' political power.

The tension was exposed after POLITICO reported in April that the Trump administration had determined the tribes were a race, not discrete nations, and shouldn't be exempted.

"HHS believes that such an exemption would raise constitutional and federal civil rights law concerns," according to a review by administration lawyers earlier this year.

After tribes threatened lawsuits and key lawmakers like Oklahoma GOP Rep. Tom Cole applied pressure, HHS Secretary Alex Azar and other top officials suggested the issue was "resolved" and would be handled by the states.

"Based on comments made by Seema Verma to the American Hospital Association in early May, we believe the federal government is allowing states flexibility," said Jo Stainsby, spokeswoman for the Oklahoma Health Care Authority, which is also seeking to add work requirements but exempt the tribes.

However, HHS department lawyers still maintain an exemption amounts to an illegal preference, according to three officials with knowledge of the determination. Arizona's revised request also was deemed illegal because it was narrowly written, using terms that would exempt Native Americans without expressly referencing the tribes.

The tribes will be "disappointed," said one official, who added that there was a slim chance the lawyers' decision could be reversed in time for Arizona's request. "Despite what Azar told them in May, it doesn't look like HHS is going to deliver."

Seeking to build a stronger legal case

To buttress its past and pending coverage decisions, the Trump administration has taken the unusual step of soliciting additional public comments on states' Medicaid plans.

CMSthis week will conclude its second round of collecting comments on Kentucky's stalled Medicaid overhaul, which was originally set to take effect on July 1. The administration also quietly reopened the comment periods for requests made by Alabama and Mississippi, which are seeking to apply work requirements, too. State waiver applications typically go through one required public review before a decision is made.

POLITICO first reported on the administration's plan to collect more comments as a legal gambit to address a federal judge's concerns about Kentucky's Medicaid overhaul. The judge in June blocked the state's overhaul from taking effect, saying the Trump administration failed to consider how the plan would reduce access to coverage, and he specifically criticized Azar for disregarding public comments that were overwhelmingly against the plan.

Trump administration lawyers believe collecting more comments will address thoseconcerns and allow them to craft stronger versions of work requirements in other states, according to three officials with knowledge of the strategy.

Administration lawyers last month also told Kentucky Gov. Matt Bevin to reinstate Medicaid benefits he had abruptly — and illegally — cut for nearly half a million residents.

Bevin canceled dental, vision and transportation benefits with no notice, effective July 1, after the federal court ruled against his state's overhaul. The surprise move created problems across the state, with some patients losing coverage in the middle of multiday medical procedures. While Bevin argued the court's decision forced him to cancel existing benefits, the lack of notice violated federal rulemaking, advocates and administration lawyers concluded. Bevin reinstated the benefits on July 19 — the same day CMS announced it was moving forward with efforts to support Kentucky's Medicaid changes.

CMS sidestepped questions about the legality of Bevin's cuts and the swift reversal.

"Kentucky ultimately withdrew the state plan amendments in question and thus no final action was taken by CMS," said a spokesperson.

Georgetown's Alker said Bevin's moves were indefensible. "It certainly was illegal," she said. "I thought it was one of the most appalling, small-minded things I have ever seen a politician do."